No “horsesh**”: Dumping Verizon for T‑Mobile would cost me $150

T-Mobile US yesterday made an offer that is seemingly too good to refuse. AT&T, Verizon, or Sprint customers can jump to the underdog "Un-carrier" and get a lower monthly bill, a phone trade-in credit of up to $300, and T-Mobile will pay off their early termination fees (ETF). T-Mobile CEO John Legere celebrated the offer by calling his competitors' offerings "horseshit."

But like anything, it's not a slam dunk for everyone. If I were to switch from Verizon Wireless to T-Mobile, for example, I'd end up paying T-Mobile $150 more than I would pay Verizon over the next two years. Here's why.

Un-carrier marketing, real carrier restrictions

It comes down largely to the fact that, as we reported yesterday, T-Mobile's promise to pay off early termination fees is contingent on customers trading in their old phones and purchasing new ones from T-Mobile. While you can still bring your own phone to T-Mobile if it's unlocked and compatible with the network, if you do, T-Mobile won't pay off your ETF.

Further Reading

T-Mobile will pay early termination fees for AT&T, Sprint, and Verizon customers.

I have an iPhone 5S with 64GB of storage that I bought for $400 which (sadly enough) is the subsidized price that required me to enter a new two-year contract with Verizon Wireless. I pay Verizon $75 a month (plus $6 in taxes and fees, but I'm setting that aside to make the comparison with T-Mobile an apples-to-apples one). That gets me 250 texts, 450 minutes, and 6GB of data. The amount I actually use is much less, so it's plenty. I barely talk on my cell phone, and I've only gone over 250 texts once in nearly 10 years (due to excessive texting caused by the Red Sox romping through the World Series).

To qualify for T-Mobile's new program, I have to trade that device in. The T-Mobile website estimates that turning in my iPhone would provide $300 in credits.

In addition to that, T-Mobile would reimburse the early termination fee I'd have to pay to break my contract with Verizon. That fee is $350 minus $10 for each full month of the contract I've completed. The fee for me would be $320, but in this scenario it doesn't matter because T-Mobile will cover the charge.

Now, I need to purchase a new iPhone 5S with 64GB of storage from T-Mobile since I was required to trade in my Verizon one to get the incentives. The T-Mobile iPhone 5S will cost me $800 plus $10 for a SIM starter kit. Instead of paying that up front, T-Mobile assumes I will pay $200 now and $25 per month over the next 24 months to cover the other $600.

At this point, I am effectively paying T-Mobile $210 up front and receiving a $300 credit, so I'll actually pay nothing and have $90 in credits toward my monthly bills. Now I have to choose a monthly plan.

The cheapest option is $50 per month for "unlimited talk, text, and Web." While unlimited talk and text sounds cool, I don't talk or text enough to make that a selling point. Unlimited Web sounds great, but in reality T-Mobile throttles your speed after you pass 500MB each month.

I don't want slower service, so I would go with one of the more expensive plans. It's $60 per month for a plan that throttles speed after 2.5GB and $70 per month for one that is truly unlimited. My usage may go up over time, but as of now, I never go over 2.5GB, so I'll select the $60 per month plan.

That, in addition to the $25 I'm paying for the device each month, gives me an $85 monthly bill (plus taxes and fees). That means I'm paying T-Mobile $10 a month extra for two years, and if I left early, I would have to pay off the balance owed toward the $800 iPhone.

Over two years, the extra $10 a month is $240. I have a credit of $90, so I'm going to pay T-Mobile $150 more than I would pay Verizon over the same amount of time. The only way to save money would be to get a different, less expensive phone or accept slower speeds after 500MB each month.

It would actually be cheaper for me to pay the Verizon early termination fee myself and bring my phone to T-Mobile. The Verizon iPhone 5S is unlocked out of the box, and customer reports suggest I could use it on T-Mobile's network. Assuming that's the case, I'd pay a breakup fee of $320 to Verizon and pay T-Mobile $60 a month, $15 less than what I'm spending today. It would take a little more than 21 months to break even.

I would make out better on T-Mobile's ETF-reimbursement offer if I was satisfied with a 16GB phone. Trading in a 16GB iPhone 5S would give me a $295 credit instead of $300. A new 16GB iPhone 5S from T-Mobile costs $600, paid off with no money down and $25 a month for two years. If I did that, I'd save $55 over two years by switching to T-Mobile, about $2.30 per month.

Further Reading

This was all hypothetical—I'm not going to switch. Verizon has its annoyances, but the cellular coverage has always been spectacular for me. I wouldn't risk going to a different carrier unless I got real savings and was certain the service would be nearly as good.

None of this answers the question of whether you would benefit from switching to T-Mobile. For one thing, my monthly bill may be lower than those of other Verizon customers because I'm holding on to an ancient plan from before the iPhone and Android even existed. My 6GB of data is better than normal too. I used to get just 2GB, but Verizon helpfully tripled my monthly allotment after iTunes Match malfunctioned and ate up a ton of my cellular data when it wasn't supposed to.

Other Verizon customers have it worse. Business Insider reporter Steve Kovach writes that he pays Verizon $110 per month for 2GB of data and unlimited calling and texting. He's switching to T-Mobile.

Still, my own situation probably isn't that unique. Ars Senior Reviews Editor Lee Hutchinson, an AT&T customer with a family plan for him and his wife, did the math. He found that if he really wanted to switch to T-Mobile, the best course would be to eat the ETF himself.

The $75 pricing I have is no longer available to new Verizon customers. The closest current offering comes from Sprint, whose website shows an offer of unlimited talk, text, and data to new customers for $80 a month. A new smartphone plan from Verizon with unlimited talk, text, and 2GB of data costs $100 a month for new customers.

Why isn't this easier? Oh right, money.

The nagging question behind all this is: why can't you just bring your own phone to T-Mobile and get the deal they so enthusiastically announced yesterday? We asked T-Mobile PR and found that, while the company calls itself the "Un-carrier," it uses pretty much the same marketing speak as all of the non-Un-carriers.

When we asked why customers can't qualify for this deal if they bring their own phone, T-Mobile PR responded, "A big reason customers want out of contracts is to get a new phone. Customers can upgrade to one of the latest devices, get initial credit to help offset startup costs like down payment, insurance, device taxes, or accessories."

That doesn't answer the question, but T-Mobile got closer to the truth when it told us, "When customers trade in their device, it is really a win-win for both the customer and T-Mobile. A device trade-in provides consumers some initial credit to help with new device purchase or startup costs like down payment, device taxes, or accessories. For T-Mobile, we still see value in the devices consumers no longer want."

In all likelihood, T-Mobile is reselling those phones so it can make a profit despite paying off those early termination fees. There's nothing wrong with that—it's just good business sense. But it means T-Mobile's newest gambit won't attract the bring-your-own-device customers that typically love T-Mobile.

And while T-Mobile offers this deal without breaking its pledge to eliminate service contracts, it effectively saddles new customers with an early termination fee if they decide to leave T-Mobile before two years. "If you cancel wireless service, remaining balance on phone becomes due," T-Mobile will tell you when you buy a phone.

Overall, T-Mobile's offer is a good thing for a market where many consumers feel trapped with a carrier they don't like. While I wouldn't benefit, other people surely will. Just make sure to do the math before switching.

Promoted Comments

I think the most telling indication that that the cell phone service model is broken in the US is that everyone seems to have a completely unique calculation as to whether it would be cheaper to stay with a current carrier or move to another.

I bought my iPhone 5 64GB for AU$999 and went with Telstra prepaid for AU$30/m. That's free text messages and calls between 6pm and 6am each night ("special offer" that they've been renewing for ages) and $250 in credit (which is what text messages and calls would otherwise come out of) plus 500MB data.

My data usage is quite low because of wifi at home and work (i.e. I'm only using cellular data when I'm out and about).

So $1719 over 24 months. If I were to buy the iPhone 5S 64GB through Telstra it's $90/m ($0 upfront) for 24 months which is $2160.

I did the math for my family. We support the grandparents as well, leaving us with 2 lines with just talk/text, and four lines that need data. Switching to an MNVO or T-mobile would cost more over time assuming we want new phones every 2 years

While an MNVO or T-mobile make the most sense for an individual willing to use Android (especially something like a Nexus 5 or a Moto X), Verizon and AT&T offer competitive rates for a large family locked into Apple (not that uncommon, from what I gather).

I have two lines on verizon, setup in grandfathered family share of 750 min, 250 txt per line and unlimited data on both lines. This comes out to roughly $155/mo after taxes. We currently have two LTE devices making happy work of that plan with nationwide roaming. Great for that random cross country car trip streaming pandora over 4G the entire way last year.

The downside, is to maintain this plan, we're paying full retail for our devices to upgrade and there is nothing preventing Verizon from just kicking us in the future since we are out of contract. I've been a VZW customer for over 8 years now, but I'm ready to switch after the lifespan of our current devices expire. Problem is, I haven't seen any plans or networks in the US that beat the grandfathered plan/price and have good enough coverage. I'll just keep my eyes open along the way.

I don't care about unlimited talk/text anymore, since I may make one call a week if that. I want data and the lack of worry about if I'm using too much or not.

The cheapest option is $50 per month for "unlimited talk, text, and Web." While unlimited talk and text sounds cool, I don't talk or text enough to make that a selling point. Unlimited Web sounds great but in reality T-Mobile throttles your speed after you pass 500MB each month.

Will they reimburse you for the $30/month + 5GB data plan ? That sounds like the one you actually want given that you want a ton of data but don't care about minutes.

The cheapest option is $50 per month for "unlimited talk, text, and Web." While unlimited talk and text sounds cool, I don't talk or text enough to make that a selling point. Unlimited Web sounds great but in reality T-Mobile throttles your speed after you pass 500MB each month.

Will they reimburse you for the $30/month + 5GB data plan ? That sounds like the one you actually want given that you want a ton of data but don't care about minutes.

Nope. The offer requires switching to one of the T-Mobile postpaid plans.

In this particular case, it seems better to pay Verizon's ETF yourself and switch to the $30/month prepaid with existing iPhone as other people suggested.

T Mobile and AT&T both have better deals that are no longer offered, too.

Comparing these deals to the current offerings is a bit disingenuous.

The T-Mobile offer is for people who are on AT&T, Sprint, or Verizon regardless of what plan they have. It's always the case that many people have plans that are different from what a brand new customer would get. But the T-Mobile offer is targeted at people who are switching, not at people who are signing a contract for the first time today.

This is a real-world example of the type of customer that T-Mobile would like to lure over so I don't get your objection. It'd be one thing if I said this example proves no one should switch to T-Mobile, or if I didn't write something like "While I wouldn't benefit, other people surely will," or if I didn't include an example of someone who is switching and will save money. Each person has a different scenario, for some it's a good deal, for some it's not.

Why not consider the prepaid unlimited text/web (i.e., 5 GB) + 100-minute plan for $30/mo. (tax-free)? That's a savings of $51/mo., or $1,224 over two years. Sell your old CDMA iPhone 5S 64GB easily for $500 on Amazon, which minus $40 in fees gives you $460 to put towards your new $850 (+ $75 tax @ 8.75%) 5S. Combined with the SIM package and your ETF, that's an outlay of $390 + $75 + $10 + $320, or $795. That would end up saving you $429 over two years; you'd make up for the initial outlay on the sixteenth month after switching over.

"T-Mobile throttles your speed after you pass 500MB each month." Wrong, the 500MB applies to a tethered device on the unlimited plan not the phone usage itself which will slow you down once you go over what every cap they set as being "unlimited" (something all carriers do). I am at 2GB of usage on my 2.5GB plan and I get 15Mbps on 1 bar in my house no issues.

From the T-Mobile website, in reference to the $50 per month plan: "No overages. You will never have overage charges on our network. If you exceed your allotment of up to 500MB of high-speed data, your data speed will simply be slowed until your next billing cycle."

And while T-Mobile offers this deal without breaking its pledge to eliminate service contracts, it effectively saddles new customers with an early termination fee if they decide to leave T-Mobile before two years. "If you cancel wireless service, remaining balance on phone becomes due," T-Mobile will tell you when buy a phone.

Seriously, how hard is this to understand? You have to pay for your device, period! The are making it easy for you by giving you 24 or so monthly installments if you don't wanna pay upfront. What did you expect? To change your mind half-way and get away with paying? Try that with your auto or house loan!

And this is hugely different than a contract! The reason is because unlike the other carriers in the US, with T-Mobile you can choose a $100 device instead of a $600 one, you can choose to get a $600 one and keep it for 3 years, you can choose to buy a refurbished phone off eBay, etc etc. Varying savings across the board, controlled by YOU as the customer and not by the carrier. How hard is it to understand people? Europe has been doing it since forever! It's not that difficult!

The big sell for Uncarrier 4 is for family plans. It says you can bring your phone with you AND they will pay the EFT. You only have to select a post paid option. Example 4 Lines not including phones;Line 1 $70/ Line 2 $50 / Line 3 $30 / Line 4 $30 (line 5 is also $30) for unlimited voice, text and unlimited data. The hard part is figuring out if the 3 other lines really is unlimited 4G data. That's $180 per month plus fees and taxes. It also includes International Data on all lines.

Because you do not have to bring a phone, you could easily sell that iPhone of yours at full street value and have TMO pay your EFT. With Verizon, you do not have to pay them back for the phone. T-mobile requires you pay for the phone before you leave. You could use the funds from the sale of your iPhone 4 to pay for a phone outright on T-mobile. Fair enough!

I use the Google Nexus 4 with the T-Mobile $70 pre-paid (no additional tax or feels). This includes unlimited voice/text/4G data with no caps. And I've tested that no cap streaming 320 encoded streaming music from Google play for a straight month. I ended up with ~16GB.

Coverage has never been a problem, but I know there are people who live in areas with limited or no TMO coverage. This was addressed with the new spectrum TMO will hopefully get from Verizon. This should close the loop in the spotty areas.

T-Mobile truly believes in their service and recognize being dirt bags for the past few years. Most, if not all people have nothing to loose by switching as long as they are in areas with coverage.

In the end, T-mobile has changed mobile service for ever. Favoring the consumers, not the carriers.

EDIT: (For Jon Brodkin) I miss read T-Mobile information. You can bring a tablet, not a phone. You are required to trade in a working phone."What are your eligibility requirements?In order to qualify for this ETF offer, you must be switching from a postpaid plan with AT&T, Sprint or Verizon and port your current numbers to T-Mobile. You would need to trade-in a working mobile phone or tablet and purchase a new device with T-Mobile on a qualifying postpaid Simple Choice plan (you would not be able to sign up for a T-Mobile prepaid or Simple Choice Family Plan with no credit check). All lines must be activated in the same T-Mobile market with the same billing address and area code."

I bought my iPhone 5 64GB for AU$999 and went with Telstra prepaid for AU$30/m. That's free text messages and calls between 6pm and 6am each night ("special offer" that they've been renewing for ages) and $250 in credit (which is what text messages and calls would otherwise come out of) plus 500MB data.

You know you can buy more data with your recharge credit right? I use Telstra's $30 pre-paid as well, but use the recharge credit to buy the 700MB PlusPack which puts me over a gig a month.

There is no way I would fall for the bait of T-Mo paying me to switch from Verizon. The main reason is I travel many times a year away from my work location near Philly to my home in northern KY. For the most part, T-Mo has no coverage in the vast majority of northeastern KY and their roaming agreement with AT&T only allows for 100MB of data which I can blow through way too quickly. No thanks. Having nearly no coverage with Sprint is the only reason I ever considered T-Mo as a back up device and now I have Verizon so I don't worry about a lack of coverage.

For those who don't want to lose money on the trade in proposition of a fancier phone... Would it be possible to downgrade devices on the old plan, swap to the lowest device on T-Mobile, then swap back to your preferred device after taking advantage of the EFT payoff?

Can you produce a link to the $75/month plan from Verizon? Because it doesn't exist anymore, as far as I can tell. In fact, according to their website today, Jan 9, 2014, 6GB of data would cost $80/month, plus $40/month for a smartphone, $120 total per month.

If this is an old plan that you're grandfathered into then you are comparing apples to oranges since that plan is impossible to get currently, and likely impossible to keep without paying full retail (or much less-subsidized) for a new device.

Not to mention that Verizon's "I have my own device" link doesn't seem to mention any change in price. That is half the point of T-Mobile's "un-carrier" branding, disconnecting device payments (subsudies) from the plans, with the other half being the lack of contracts on plans.

And the second to last paragraph about not really getting rid of ETFs is just wrong. It's not a service plan ETF, since there is no service plan contract. You agreed to pay for the device in installments, and if you're now leaving their service, it make sense they'd want the remaining value for the device that they've been basically loaning you while you take your time to pay for it. It's not an ETF, it's paying off a loan for a product you get to keep!

Can you produce a link to the $75/month plan from Verizon? Because it doesn't exist anymore, as far as I can tell. In fact, according to their website today, Jan 9, 2014, 6GB of data would cost $80/month, plus $40/month for a smartphone, $120 total per month.

If this is an old plan that you're grandfathered into then you are comparing apples to oranges since that plan is impossible to get currently, and likely impossible to keep without paying full retail (or much less-subsidized) for a new device.

Not to mention that Verizon's "I have my own device" link doesn't seem to mention any change in price. That is half the point of T-Mobile's "un-carrier" branding, disconnecting device payments (subsudies) from the plans, with the other half being the lack of contracts on plans.

And the second to last paragraph about not really getting rid of ETFs is just wrong. It's not a service plan ETF, since there is no service plan contract. You agreed to pay for the device in installments, and if you're now leaving their service, it make sense they'd want the remaining value for the device that they've been basically loaning you while you take your time to pay for it. It's not an ETF, it's paying off a loan for a product you get to keep!

SIncerely,

A Sprint Customer.

It is an old plan, I said in the article "I'm holding on to an ancient plan from years before the iPhone and Android even existed."

As far as the plan being "likely impossible to keep without paying full retail (or much less-subsidized) for a new device," I also said in the article that "I have an iPhone 5S with 64GB of storage that I bought for $400 which (sadly enough) is the subsidized price that required me to enter a new two-year contract with Verizon Wireless." The unsubsidized price would have been $800.

Given that I have an ancient plan, and that I kept the same pricing terms after buying a subsidized phone, I can tell you from experience that it is very possible to keep my plan without paying full retail. I wrote about this in an earlier article that I linked to in this one. I had to give up unlimited data but I kept the same pricing.

\If this is an old plan that you're grandfathered into then you are comparing apples to oranges since that plan is impossible to get currently, and likely impossible to keep without paying full retail (or much less-subsidized) for a new device.

Not sure how this is apples to oranges. He's explaining what happens if he decides to switch to T-Mo. He's currently in a grandfathered plan, but that's irrelevant, since T-Mobile is targeting him as a customer (since he's currently under contract with Verizon). The customer isn't hypothetical, the switch is.

And while T-Mobile offers this deal without breaking its pledge to eliminate service contracts, it effectively saddles new customers with an early termination fee if they decide to leave T-Mobile before two years. "If you cancel wireless service, remaining balance on phone becomes due," T-Mobile will tell you when buy a phone.

...Seriously, how hard is this to understand? You have to pay for your device, period! The are making it easy for you by giving you 24 or so monthly installments if you don't wanna pay upfront. What did you expect? To change your mind half-way and get away with paying? Try that with your auto or house loan!...

Yeah his complaint about that was wrong. It's obvious this is referring to the amount due on the phone, which (duh) they expect you to pay.

The nagging question behind all this is: why can't you just bring your own phone to T-Mobile and get the deal they so enthusiastically announced yesterday?

Because this would be economic suicide? You could go to Verizon get the subsidy for a 64GB iPhone or some other 850$ phone and then immediately go over the street to T-Mobile and get you early termination fee. In other words everybody who isn't insane would get the Phone subsidy from AT&T and Verizon and then the cheaper T-Mobile plans.

This program is targeted at people who want to get out of their contract most likely not 3 months after they went into the contract like you. This article would be good if it was less suggestive and would highlight the situation more evenly. Summary weird article.

Am I the only one wondering what would keep someone from trading in a older phone, keep their unlocked phone and buying T-Mobile's cheapest phone, the "Huawei Summit - Refurbished" @ $96 and switching out the SIM card with your unlocked phone?

@Jon, have you thought of moving country? The US mobile market is weird, and the way spectrum is divided is definitely non-optimal. You might save as much as several hundred dollars a year. Which, assuming you have a very long life ahead of you, could make it financially worthwhile.